Saturday, October 28, 2017

changing sweep accounts

My E*Trade account is currently earning a measly 0.01% interest (in the E*Trade Financial Extended Insurance Sweep Deposit Account).

However I see you can change the sweep account to HTSXX (JPMorgan 100% US Treasury Securities Money Market Fund) which is currently earning a whipping 0.50%.

Here's how to change your sweep account at E*Trade.

In the very top menu on the broker’s website, select ‘Customer Service’. On the next page, click on ‘Self Service’ and then select ‘Change / Update Uninvested Cash Option’ under ‘Cash Management (Deposits, Transfers and Withdrawals)’. Doing so will produce a new page with a drop-down menu of the available core position options. Select the one you want and follow the prompts.

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For Schwab customers, I've noticed on their statements that SWVXX (Schwab Value Advantage Money Fund) is now yielding higher than Schwab Cash Reserves (0.90% to 0.67%).  You can't set it up as a sweep account (as far as I know), but you can transfer back and forth from Cash Reserves to SWVXX.  So that's what I've started to do.

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For Fidelity customers, earlier this year (2/13/17) I noticed that my CASH in my Fidelity account was getting 0.01% while my Fidelity Government Cash Reserves (FDRXX) in my IRA was getting 0.27%.  (Looking back it had been at 0.01% as recently as February 2016).

I wasn't able to switch my non-IRA account to FDRXX, the options I saw were SPAXX (Fidelity Government Money Market) and FZFXX (Fidelity Treasury Money Market).  Morningstar reported that FZFXX was yielding 0.16% while SPAXX was yielding 0.20%, so I switched it to SPAXX.

[5/18/18 - Looking back at my log on 2/13/17 -- To change the sweep account, go to positions, and click on the current sweep vehicle.  From there you're presented a button to "Change Core Position."  If only it was this easy at the other brokerages.]

Looking at Morningstar, FDRXX is yielding 0.74%, SPAXX is yielding 0.68%, and FZFXX is yielding 0.69%.  I'll stick with SPAXX for now.

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I sure wish E*Trade had told me about this months ago.  I had to find out myself.  I looked because both Schwab and Fidelity were giving me much higher rates than E*Trade and TD Ameritrade.  So far I haven't found a good option for TD Ameritrade cash.  So currently I'm sweeping excess cash to Ally Bank savings (currently paying 1.25%).  The disadvantage is that it takes like 3 days for the transaction to complete.

Friday, October 27, 2017

predicting the market

There are two popular schools of thought re market timing. One is that it is impossible to time the market effectively and a waste of effort to try. The other is that knowing when crashes are coming is so valuable that you just have to give the objective of predicting them your best possible shot.

I hold a third view, a view which I believe is strongly supported by the research of Yale University Economics Professor Robert Shiller and research (including one paper that I did most of the work on myself!) done over the past 32 years (and largely ignored so far!). That view holds that short-term timing (predicting when crashes will come with precision) really is impossible but that predicting in a general way when they will come (long-term timing) is highly doable and absolutely required for those seeking to hold any realistic hope of long-term investing success.

Shiller's model uses valuations to make long-term predictions. Once prices go insanely high, we ALWAYS experience a wipe-out. There has never in 140 years of stock market history ever been an exception. But we CANNOT say with precision when the wipeout will come, only that it is on its way.

There is a wipe-out on its way today, according to the Shiller model. Thus, I think it makes sense to go with a low stock allocation today.

Now --

We may see stock prices double over the next year. If we see that, there are people who will complain that I was "wrong" in my advice.

I don't see it that way. The way I look at it is that the RISK of a crash is high this year. Thus, we all should be going with low stock allocations. It doesn't matter whether stocks actually crash this year or not. The risk is there. That's what matters.

Those who stay in stocks and enjoy another run-up in prices will NOT get to keep the money. They will lose all those gains plus a lot more in the crash that will follow next year or the year after that. So what good do those gains do them? I invest for the long-term. I want gains I can keep. Investors have never earned permanent gains from stock purchases made when stock were selling at the sort of prices at which they are selling today.

The losses you will see if stocks continue to perform in the future anything at all as they have always performed in the past will be devastating. It is hard for people to get their heads around how much one wipeout in a lifetime can hold you back. You lose not only the dollar value taken from your portfolio, you also lose decades of compounding returns on those dollars. Stay heavily in stocks at a time like today and you could easily set your retirement back 10 years, according to the last 30 years of academic research.

The "experts" won't tell you this. Most of the "experts" in this field make money only when people buy stocks. So they are compromised. You need to become personally familiar with what the academic research really says, not just what the people quoted as experts in this field SAY that it says. These are very, very, very different things, in my experience. The conventional wisdom in this field is dangerous stuff.

Rob Bennett, Created The Stock-Return Predictor
Answered May 9, 2013

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This answer showed up in my quora feed last night, but was posted on 5/9/13.  The Dow closed at 15,082.62 on that day.  Today it closed at 23,434.19.  Yes, one day/week/month, the market will crash again.  Here's how Buffett prepares.

Wednesday, October 25, 2017

Morningstar ratings

Millions of people trust Morningstar Inc. to help them decide where to put their money.

From pension funds to endowments to financial advisers to individuals, investors rely on Morningstar’s star ratings to help divide $16 trillion among America’s mutual funds, in much the way shoppers use Amazon’s ratings to pick products. A lot of these investors, and the people paid to guide them, take for granted that the number of stars awarded to a mutual fund is a good guide to its future performance.

By and large, it isn’t.

The Wall Street Journal tested Morningstar’s ratings by examining the performance of thousands of funds dating back to 2003, shortly after the company began its current system. Funds that earned high star ratings attracted the vast majority of investor dollars. Most of them failed to perform.

Of funds awarded a coveted five-star overall rating, only 12% did well enough over the next five years to earn a top rating for that period; 10% performed so poorly they were branded with a rock-bottom one-star rating.

EquBot

As if professional mutual fund managers didn’t have it hard enough.

Not only do they have to contend with the growing popularity of low-cost index funds, which simply buy and hold the entire market, but now here comes another threat: robot stock pickers.

That’s right.

The San Francisco firm EquBot has launched the first retail ETF to be managed using IBM’s Watson supercomputing artificial intelligence technology.

The use of computers to buy stocks isn’t new. So-called “quant funds” (short for quantitative analysis) have been around for years, relying on computer algorithms to identify short-term trading patterns and opportunities in the market.

But the AI Powered Equity ETF (AIEQ), which launched late last week, differs in that it is uses artificial intelligence to pick stocks in much the same way humans have for decades—by ranking investment opportunities on a variety of factors, including fundamentals such as profit growth and valuations.

EquBot notes that its AI technology can do humans one better because it can process over 1 million pieces of information a day—including earnings releases, economic data, consumer trends, industry developments, and headline news—to constantly update its assessment on roughly 6,000 publicly traded companies.

It then uses that computing power to select 30 to 70 stocks to own “based on their probability of benefiting from current economic conditions, trends, and world- and company-specific events,” according to a recent release.

“EquBot AI Technology with Watson has the ability to mimic an army of equity research analysts working around the clock, 365 days a year, while removing human error and bias from the process,” said EquBot CEO and co-founder Chida Khatua.

The fund’s AI technology also benefits from “machine learning,” he added—meaning it can learn as it goes, without having to be reprogrammed by humans.

So far, in its first few days of trading, the fund has gained 0.7%, according to Morningstar. That beats the 0.5% for the S&P 500 index.

Tuesday, October 24, 2017

delayed gratification

A Stanford University experiment demonstrated that one of the most important determinants of a person's future wealth was the capacity for delayed gratification. They put children alone in a room and gave them each a marshmallow and told the children that if they didn't eat the marshmallow they would be given a second marshmallow, and they would then have two. Many years later the children that were able to resist temptation and did not eat the marshmallow were significantly more economically successful than the ones that ate their marshmallow. In fact, the ones that were able to delay gratification tested better in a number of ways, got higher SAT scores, were healthier, and more successful in everything they did.

-- Saulius Muliolis, quora

Tuesday, October 17, 2017

Soros gives away $18 billion

George Soros just gave most of his wealth to his charitable organization, the Wall Street Journal reported Tuesday.

The billionaire philanthropist transferred $18 billion to Open Society Foundations, a sprawling international group of charities that works in more than 100 countries on projects focused on refugee relief, public health and many other topics.

The $18 billion figure amounts to almost 80 percent of the financier's total net worth. Before the transfer, Soros had a net worth of $23 billion, according to a Forbes tally Tuesday. The site ranks him as the 29th wealthiest person in the world.

Soros began his charitable giving in 1979, nine years after launching Soros Fund Management, the hedge fund that would propel him into America's ultrawealthy. He has given away $12 billion in the four decades since, according to his official biography, available on his website.

His first charitable work involved providing black South Africans with scholarships during the country's apartheid. During the Cold War, he provided photocopiers to people living in eastern Europe in order to reprint texts banned by communist governments. He has also underwritten the largest effort to integrate Europe's Roma, according to the biography available on his website.

Tuesday, October 10, 2017

greatest wealth creators since 1926

In the history of the markets since 1926, Apple has generated more profit for investors than any other American company.

In a phone conversation, Professor Bessembinder reminded me that the stock market is a moving target and that his rankings, while valid through the end of 2016, don’t capture the sharp movements of this calendar year. In his 2016 rankings, Exxon Mobil, not Apple, appears at the top, with net wealth creation of more than $1 trillion. Apple lags at about $745 billion.

But it has been a wild year. Exxon Mobil shares have declined more than 11 percent at a time of weak energy prices, while Apple, which just introduced a raft of new iPhones, is on a spectacular stock surge, gaining more than 37 percent.

Run the numbers as I did, and it’s clear that at this moment, Apple has pulled ahead of Exxon Mobil, with total net wealth creation of somewhere in the vicinity of $1 trillion.

As I wrote in July, Amazon, which started trading in 1997, has soared to the 14th spot. Although it hasn’t been in existence long compared with Exxon Mobil, its annualized return is the highest in the list, 37.4 percent through December. A group of young companies have also had remarkable results.

Facebook, which started trading in June 2012, is the youngest on the list, with an annualized return of 34.5 percent. Visa, which had its initial public offering of stock in 2008, is the second-newest company, with a 21 percent annualized return, followed by Alphabet (Google), ranked 11th with a 24.9 percent annualized return.

And then there is that great wealth machine, Microsoft, ranked as the third-greatest wealth creator. Since 1986, it has had an annualized return of 25 percent, making its founder, Bill Gates, the richest man in the world, with a net worth of more than $87 billion, according to Bloomberg.

No list of wealth-generating companies is complete without Berkshire Hathaway. It ranks 12th, just behind Alphabet, with an annualized return of 22.6 percent. By comparison, Exxon Mobil’s annualized return was only 11.94 percent.

Anyone who invested in Apple or Microsoft or, really, in any of these companies at their inception and just held on did extraordinarily well. You might look at that record and conclude that you should just buy the best companies as a foolproof way to get rich.

If only it were that easy.

How do you find those companies? Not here.

“The problem is, I have no idea which companies will generate the best returns over the next 10 or 20 or 30 years, “ Professor Bessembinder said. “Probably it will be some companies we’ve never heard of. Maybe it will be companies that don’t even exist now.”